BRAZIL Law and Practice Contributed by: Felipe Barreto Veiga, Rafael Teixeira, Gabriel Abdalla and Pablo Arana, BVA – Barreto Veiga Advogados
apply under CVM rules and related market standards, reflecting enhanced minority protections. 6.6 Requirement to Obtain Financing In private transactions, financing conditions are legally possible, but they are often resisted by sellers and may be accepted only in limited circumstances (or mitigated through reverse break fees, stronger cov - enants or evidence of committed funding). In public tender offers, bidders are generally expected to demonstrate committed financing (or otherwise evi - dence the capacity to fund the offer) before launch - ing the transaction, consistent with CVM requirements and market expectations. 6.7 Types of Deal Security Measures Common deal protection measures include: • break-up fees (typically subject to reasonableness and proportionality); • non-solicitation and no-shop provisions (often with customary carve-outs); • matching rights; and • exclusivity arrangements during diligence and negotiation. Brazilian law does not provide a detailed, transaction- specific statutory regime for deal protections; enforce - ability is assessed primarily under general contract principles, corporate governance standards, and (where applicable) fiduciary duties and disclosure requirements in public-company contexts. Interim periods are most commonly impacted by regulatory timing (CADE/sector approvals) and public-market process requirements, rather than by recent statutory changes to deal protection rules. 6.8 Additional Governance Rights Where a bidder acquires a non-100% stake, addition - al governance rights are commonly structured through shareholders’ agreements and may include: • board representation (and committee participation, where relevant); • reserved matters/veto rights over key decisions; • information and inspection rights;
• pre-emptive rights and anti-dilution protections (as applicable); • right of first refusal or right of first offer; • lock-up period; • tag-along and drag-along rights; • exit mechanisms, including put/call options and liquidity pathways. The scope of such rights will vary based on bargaining power, regulatory constraints (if any) and the com - pany’s governance structure. 6.9 Voting by Proxy Brazilian law permits shareholders to vote by proxy, subject to formal requirements. In public companies, proxy voting and proxy solicitation practices are also subject to applicable CVM regulation and market rules. 6.10 Squeeze-Out Mechanisms Brazil does not have a universal “short-form merger” squeeze-out mechanism equivalent to certain other jurisdictions. In practice, transactions seeking to reach full ownership commonly use a combination of: • delisting tender offers, subject to CVM rules and minority protection requirements; • corporate reorganisations, such as mergers or related restructuring steps, where permitted and properly approved; • merger of shares ( incorporação de ações ), through which dissenting shareholders receive cash con - sideration under statutory procedures and approv - als; and • in private M&A transactions, the controlling share - holder’s drag-along rights. Delisting transactions typically require compliance with CVM procedures and enhanced protections for minority shareholders, including process and pricing- related safeguards. 6.11 Irrevocable Commitments Particularly in negotiated transactions involving a controlling shareholder, it is common to seek commit - ments to tender and/or vote in favour of the transac - tion. These undertakings are typically negotiated and
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